1-1
CHAPTER 1
THE MANAGER AND MANAGEMENT ACCOUNTING
See the front matter of this Solutions Manual for suggestions regarding your choices of
assignment material for each chapter.
1-1 Management accounting measures, analyzes and reports financial and nonfinancial
information that helps managers make decisions to fulfill the goals of an organization. It focuses
on internal reporting and is not restricted by generally accepted accounting principles (GAAP).
1-2 Financial accounting is constrained by generally accepted accounting principles.
Management accounting is not restricted to these principles. The result is that
1-3 Management accountants can help to formulate strategy by providing information about
1-4 The business functions in the value chain are
• Research and development—generating and experimenting with ideas related to new
products, services, or processes.
1-2
1-5 Supply chain describes the flow of goods, services, and information from the initial
sources of materials and services to the delivery of products to consumers, regardless of whether
1-6 “Management accounting deals only with costs.” This statement is misleading at best,
and wrong at worst. Management accounting measures, analyzes, and reports financial and non-
1-7 Management accountants can help improve quality and achieve timely product deliveries
service.
1-8 The five-step decision-making process is (1) identify the problem and uncertainties (2)
1-9 Planning decisions focus on selecting organization goals and strategies, predicting results
under various alternative ways of achieving those goals, deciding how to attain the desired goals,
making.
1-10 The three guidelines for management accountants are
1. Employ a cost-benefit approach.
3. Apply the notion of “different costs for different purposes”.
1-11 Agree. A successful management accountant requires general business skills (such as
1-3
1-12 The new controller could reply in one or more of the following ways:
(a) Demonstrate to the plant manager how he or she could make better decisions if the
plant controller was viewed as a resource rather than a deadweight. In a related way,
the plant controller could show how the plant manager’s time and resources could be
1-13 The controller is the chief management accounting executive. The corporate controller
1-14 The Institute of Management Accountants (IMA) sets standards of ethical conduct for
management accountants in the following four areas:
1-15 Steps to take when established written policies provide insufficient guidance are
(a) Discuss the problem with the immediate superior (except when it appears that the
1-16 (15 min.) Value chain and classification of costs, computer company.
Cost Item
Value Chain Business Function
a.
b.
c.
d.
e.
f.
g.
h.
Production
Distribution
Design of products and processes
Research and Development
Customer Service or Marketing
Design of products and processes
(or Research and Development)
Marketing
Production
1-17 (15 min.) Value chain and classification of costs, pharmaceutical company.
Cost Item
Value Chain Business Function
a.
b.
c.
d.
e.
f.
g.
h.
Design of products and processes
Marketing
Customer Service
Research and Development
Marketing
Production
Marketing
Distribution
1-18 (15 min.) Value chain and classification of costs, fast food restaurant.
Cost Item
Value Chain Business Function
a.
b.
c.
d.
e.
f.
g.
h.
Production
Distribution
Marketing
Marketing
Marketing
Production
Design of products and processes (or Research and Development)
Customer service
1-19 (15 min.) Key success factors.
Change in Operations/
Management Accounting
Key Success Factor
a.
b.
c.
d.
e.
Innovation
Cost and Quality
Time
Time and Cost
Cost
1-20 (10-15 min.) Planning and control decisions.
Decision
Planning
Control
Control
Planning
Planning
1-21 (15 min.) Five-step decision-making process, manufacturing.
Step in Decision-Making Process
Obtain information
Make predictions about the future
Identify the problem and uncertainties
Implement the decision, evaluate performance, and learn
Make predictions about the future
Make decisions by choosing among alternatives
Obtain information
1-22 (15 min.) Five-step decision-making process, service firm.
Step in Decision-Making Process
Obtain information
Identify the problem and uncertainties
Obtain information and/or make predictions about the future
Make predictions about the future
Obtain information
Make decisions by choosing among alternatives
1-6
1-23 (10–15 min.) Professional ethics and reporting division performance.
1. Miller’s ethical responsibilities are well summarized in the IMA’s “Standards of Ethical
Conduct for Management Accountants” (Exhibit 1-7 of text). Areas of ethical responsibility
include the following:
• competence
2. Miller should refuse to follow Maloney’s orders. If Maloney persists, the incident should
1-24 (15 min.) Planning and control decisions, Internet company.
1. Planning decisions
a. Decision to raise monthly subscription fee
c. Decision to upgrade content of online services (later decision to inform subscribers
2. Other planning decisions that may be made at WebNews.com: decision to raise or lower
advertising fees; decision to charge a fee from on-line retailers when customers click-through
reduced.
1-25 (20 min.) Strategic decisions and management accounting.
1. The strategies the companies are following in each case are:
a.
b.
c.
d.
Low price strategy
Differentiated product strategy
Low price strategy
Differentiated product strategy
2. Examples of information the management accountant can provide for each strategic decision
follow.
a.
b.
c.
d.
Cost to manufacture and sell the cell phone
Productivity, efficiency and cost advantages relative to competition
Prices of competitive cell phones
Sensitivity of target customers to price and quality
The production capacity of Roger Phones and its competitors
Cost to develop, produce and sell new software
Premium price that customers would be willing to pay due to product uniqueness
Price of basic software
Price of closest competitive software
Cash needed to develop, produce and sell new software
Cost of producing the “store–brand” lip gloss
Productivity, efficiency and cost advantages relative to competition
Prices of competitive products
Sensitivity of target customers to price and quality
How the market for lip gloss is growing
Cost to produce and sell new line of gourmet bologna
Premium price that customers would be willing to pay due to product uniqueness
Price of basic meat product
Price of closest competitive product
1-26 (15 min.) Management accounting guidelines.
1-8
1-27 (15 min.) Role of controller, role of chief financial officer.
1.
Activity
Controller
CFO
Managing accounts payable
X
Communicating with investors
X
Strategic review of different lines of businesses
X
Budgeting funds for a plant upgrade
X
Managing the company’s short-term investments
X
Negotiating fees with auditors
X
Assessing profitability of various products
X
Evaluating the costs and benefits of a new product design
X
2. As CFO, Perez will be interacting much more with the senior management of the
company, the board of directors, auditors, and the external financial community. Any experience